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7 Successful Stock Market Strategies: Using market valuation and momentum systems to generate high long-term returns by Glenn Martin

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PART A.BACKGROUND THEORY

Chapter 1. Risks and Returns

Why it is riskier to invest in cash than in the FTSE 100 or FTSE 250 over the long term

The nature of long-term risk

Most people in the UK invest their long-term savings in cash deposits, perhaps thinking this is less risky than investing in equities. After all, most people can remember the 1987 hurricane crash or the collapse which followed the bursting of the dot.com bubble, can’t they? However, these investors are wrong, for two reasons:

  1. They are confusing short-term risk with long-term risk.
  2. They misunderstand the nature of investment risk.

Investors who put their long-term savings in cash because of concerns about short-term risk are decimating their long-term savings. Clearly, if ...

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